The group, comprising “21 highly respected global institutional investors”, said it has sought to work “constructively with the company over the past nine months to cure its numerous defaults” and will continue to do so in good faith. “However, in the event Byju’s intentionally remains in default, the lender group reserves all rights available to it to enforce the credit agreement,” the media statement by the group said.
These investors who participated in the syndicated term loan B (TLB) facility provided to Byju’s in November 2021, said the lawsuit was an effort by the company “to avoid complying with its obligations, including making contractually required payments”.
A Byju’s spokesperson declined to comment. A spokesperson for the lenders’ group of lenders did not respond to ET’s email query till press time Friday.
Earlier this week, Byju’s said the lenders’ demands were “high-handed” while filing its suit in the New York Supreme Court against American investment management firm Redwood and its entities over the TLB.
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Byju’s has missed its quarterly interest payment of about $40 million on the TLB, which was due by June 5.
The now contentious loan has been at the centre of the Bengaluru-headquartered firm’s financial troubles in recent months.
In its suit, Byju’s said it has sought to “disqualify” lender Redwood, which has allegedly resorted to “predatory tactics”, and consistently increased its exposure to the loan by acquiring a sizable stake in the TLB with “the intent of making windfall gains”.
Prior to that, the two sides could not reach an agreement over new terms for the loan after several weeks of negotiations.
Open to discussions
On Tuesday, Byju’s said “it remains open to discussions with the TLB lenders and is ready, willing and able to continue making payments under the TLB if the lenders withdraw their ill-conceived actions and honour the terms of the agreement”.
“As such, Byju’s cannot be expected to and has elected not to make any further payment to the TLB lenders, including any interest, until the dispute is decided by the court,” it said in a statement.
The offshore lenders were scheduled to receive their interest payments on May 25, as per the contract, with a grace period until June 5.
Byju’s had arranged the $1.2-billion term loan in November 2021, calling it one of the biggest such financing deals by an Indian startup at the time. The company had planned to use the debt to finance some of its potential global acquisitions.
The TLB was sought before Byju’s slipped into turmoil globally and in India with demand for its edtech offerings slowing amid easing of pandemic-induced lockdowns and reopening of educational institutions.
Ongoing debt woes
In April, ET reported that Byju’s lenders had sought up to $200 million in prepayment and that the company was offering a higher rate of interest on the loan to lenders as part of the new agreement.
People in the know told ET that a delay in furnishing the company’s audited financials for FY21 and FY22 had triggered the discussions on new terms for the TLB. Byju’s has yet to file its audited FY22 results.
In May, Byju’s closed a Rs 2,000-crore debt round from Davidson Kempner Capital in a structured credit transaction against the cash flows of its subsidiary Aakash Educational Services. It is also planning an IPO for the test-prep firm by next year.
A part of the Davidson Kempner financing was supposed to be used to refinance the TLB, people aware of Byju’s plans had told ET.
The General Atlantic-backed company is fighting another lawsuit in an American court against lenders who have proposed to take over its US entity, Byju’s Alpha, by putting their representative in charge after a default earlier this year.
Valuation drops
After a delay of almost 18 months, Byju’s had released its financial results for FY21 last September. It said that revenue from operations had been readjusted to Rs 2,280 crore even as the company incurred massive losses of Rs 4,588 crore, up from just Rs 262 crore in the previous fiscal year (FY20). This was a significant drop of 48% from the projected revenue of about Rs 4,400 crore cited in the unaudited results of Think & Learn Pvt Ltd, the parent entity which operates the Byju’s brand.
In a press statement last year, Byju’s had announced posting nearly Rs 10,000 crore in gross revenue in FY22.
On Thursday, ET reported that Byju’s is expected to let go of more staffers in another cost-cutting exercise to streamline operations.
Last month, BlackRock, a minority shareholder with less than a 1% stake, wrote down the edtech’s valuation to $8.29 billion, as disclosed in a filing dated March 31, 2023, and reviewed by ET. It was the second time that BlackRock had marked down the edtech major’s valuation in recent months. It had previously marked down the edtech company’s valuation to a little over $11 billion in December 2022.
Byju’s — after its last fundraising in 2022 — was valued at $22 billion.
It has been trying to stitch up a new funding through a mix of equity and convertible notes, but that is yet to be formalised and announced.
Meanwhile, the Directorate of Enforcement conducted searches on several premises linked to Byju’s, as part of a probe into alleged violation of foreign exchange rules over the investments received and transfer of funds abroad by the edtech company.
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